There are two types of Mortgage Insurance to protect your mortgage. Each one covers a different risk, so it’s important to understand the policies before you consider taking out cover.
Mortgage Life Insurance provides a lump sum if you pass away before repaying the debt. This pays off your entire mortgage so your loved ones can stay in the family home without worrying about mortgage repayments if you’re sadly no longer around.
You can add Critical Illness Insurance for an additional premium. This means the policy pays out if you develop a critical illness, such as cancer, heart attack or stroke.
Mortgage Payment Protection Insurance covers your monthly mortgage repayments for up to 24 months if illness or injury stops you working. You may also be able to add cover for unemployment depending on your policy.
Our Mortgage Insurance cost calculator compares quotes from the UK’s best Mortgage Life Insurance and Mortgage Payment Protection providers so you can find the most affordable cover for your needs.
Insurers calculate Mortgage Life Insurance premiums using both personal and policy factors.
These relate to you and your health and you mostly can’t change them. They include your:
You choose these when you take out cover. They also affect your premiums and include:
Think carefully if you’re looking into Joint Mortgage Life Insurance. These policies only trigger a payout on the first death and then terminate leaving the surviving partner with no life insurance.
With Life Insurance on a ‘joint life first death’ basis, the most commonly-used insurance, the surviving partner is left without Life Insurance on the first couple’s death. At that point in their life, it may be expensive for them to get re-covered due to their age and any medical conditions they’ve suffered in the interim.
As such, two single Life Insurance policies may be a better option for couples and usually only costs a few pounds more to potentially secure double the payout from the outset.
We’ve used our Mortgage Life Insurance Calculator to provide some example monthly premiums. To do this, we’ve made a number of assumptions about the individual involved. For example, we’ve assumed they are:
Decreasing Mortgage Life Insurance
30 years old
40 years old
50 years old
Level Mortgage Life Insurance
30 years old
40 years old
50 years old
If you are ready to get your own mortgage life insurance quotes with your chosen level of cover you can use our quote tool to compare all the top UK providers 😊
Some important factors to look at when choosing Mortgage Life Insurance include:
You don’t typically need to write Mortgage Life Insurance into trust to protect it from inheritance tax as it’s destined for your lender to repay a debt your estate owes them. However, in certain cases it may be beneficial to do so — you can discuss this with your adviser.
If you do need to do this, look for a policy that offers online trusts. This offers the convenience of completing the paperwork online, including using e-signatures, rather than physical copies and wet signatures going back and forth in the post.
Most Life Insurance includes Terminal Illness Benefit as standard so the insurer pays out early if you’re diagnosed with less than 12 months to live. This helps with financial security at a difficult time.
Terminal illness should not be confused with critical illness insurance, it is an accelerated death payment and does not pay out should you suffer a serious illness such as heart attack, cancer or stroke.
If you want to protect yourself against the risk of suffering a serious illness you could considering adding critical illness insurance to your life insurance or setting up a separate income protection policy.
Some insurers include this for free, while with others it’s an optional extra for an additional premium.
It means the insurer steps in to pay your premiums if you’re ever off work sick and not earning. This lets you keep up with the policy until you get back on your feet so your Life Insurance doesn’t lapse.
One key way insurers distinguish themselves is in the additional benefits they offer (almost always for free) with their policies. Some of the best include:
As with life cover, insurers calculate Mortgage Payment Protection Insurance premiums using both personal and policy factors.
These include your:
You choose these when you take out cover. They also impact your premiums and include your:
We’ve used our Mortgage Payment Protection Insurance calculator to provide some premiums below. To do this, we’ve made a number of assumptions about the individual in question. For example, we’ve assumed they are:
30 years old
40 years old
50 years old
If you are know how much cover you require you can calculate your own mortgage insurance costs with our quote tool which compares all the leading UK insurers →
When looking at MPPI, you’ll want to think about:
If you take add Unemployment Insurance to your policy, you’ll need to know about the plan’s exclusion period.
This is an initial period where you can’t claim for unemployment / redundancy after you take out the policy. Exclusion periods usually range from 90 days to 120 days depending on the insurer.
The deferred period is how long you must wait before the policy starts paying out if you fall ill. You choose this when you take out the policy.
Deferral periods range from 1 week all the way up to 12 months, with longer deferred periods meaning cheaper premiums.
Some insurers offer better rates for shorter periods, while others are better for longer periods.
As it only pays out for 12 or 24 months per claim, you don’t want your deferred period to be too long.
If you want long term cover to protect you to retirement you should consider permanent health insurance instead.
Independent Protection Expert
Many Mortgage Payment Protection policies have reviewable premiums. This means the insurer is entitled to review them each year as it sees fit. You may find your premiums increase at an unpredictable rate year-on-year depending on the insurer’s financial outlook.
Better policies offer age-banded or guaranteed premiums. Age-banded premiums do rise each year, but only by a set percentage detailed in your policy documents and solely due to your age. Guaranteed premiums, meanwhile, stay fixed for the life of the policy.
Many MPPI policies use the suited occupation definition of incapacity. This means if you suffer an accident or sickness, the insurer is entitled to assess your inability to not only do your own job but also any other role your skills or experience suit you to.
If you’re still well enough to do another role the insurer feels you’re suited to, it won’t pay a claim.
This is opposed to the own occupation definition, the best definition of incapacity, where the insurer pays out if you can’t do your specific job role.
Mortgage Payment Protection only offers a short-term solution. It pays out for an absolute maximum of 24 months per claim and then stops. If you’re out of work long-term, this would likely be inadequate.
For those wanting to protect their income and mortgage repayments over a longer period, Long-Term Income Protection might be a better option.
Rather than linking it to your mortgage, insurers base Income Protection on your earnings. You receive a proportion of your gross (pre-tax) salary if accident or sickness stops you working.
While the policy isn’t specifically for your mortgage, you’re free to use the payout to maintain your monthly repayments and meet any other monthly expenses you have.
The best Income Protection pays out long-term, with a cease age set at your retirement. That means if you claim, the insurer pays a monthly income right up until you retire. You could therefore maintain your mortgage repayments over many years, rather than the maximum 24 months MPPI offers.
When covering something as important as your mortgage it’s essential to understand what you’re buying. Making a mistake could have expensive consequences.
The team at Drewberry is here to help you make an informed decision. We can help you decide whether you need Mortgage Life Insurance or Mortgage Payment Protection Insurance (or potentially both).
We’ll also calculate the cost of Mortgage Insurance by comparing quotes from every leading UK provider.
We started Drewberry™ because we were tired of being treated like a number.
We all deserve a first class service when it comes to issues as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.
For help and fee-free advice, don’t hesitate to give us a call on 02084327333 or email email@example.com.
I’ve held a policy with Drewberry for several years now. They are always friendly, insightful and offer great service.